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After Deal With Sony Fails, Zee Claims Rs 700 Crore In Merger Costs

According to a report released on Friday, Zee Entertainment Enterprises Ltd. paid an estimated Rs 700 crore to fulfil Sony’s requirements to finalize the merger agreement. In upcoming proceedings at the National Company Law Tribunal, the company run by Subhash Chandra intends to seek compensation for the Japanese media giant, amounting to Rs 700 crore. Zee plans to present these arguments before the NCLT bench to refute Sony’s notice of termination and seek damages totalling $90 million.

“It has incurred/provided for in books of account approximately Rs 700 crore towards divestment of businesses, settlement of frivolous claims (against which Zee had a strong legal case), settlement of guarantees, procuring tail insurance to Sony’s satisfaction, discontinuing several businesses on Sony’s instructions and more,” Hindu Businessline reported citing legal documents submitted by the company.

The $10 billion mega-merger between the two companies was terminated by notice delivered by Sony Group to Zee Entertainment on January 21. In addition to filing for dispute with ZEEL, Sony Group later requested $90 million for breach of terms.

Sony claimed that ZEEL had not devised a plan to handle some financial aspects of the merger and had not complied with them in its notice of termination.

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While ZEEL denies the charges and the merger agreement has shown no material adverse effect, legal sources revealed that Zee plans to demonstrate multiple discussions with Sony. According to reports, these discussions, including the joint business plan detailing month-wise profit and loss and cash flows, were allegedly held and provided to Sony.

According to the report, Zee and Sony had serious discussions regularly for a considerable amount of time to make the merger a reality. Zee carefully followed all strategic directives from Sony to hasten the merger agreement. Zee spent much time, money, and effort on the tasks Sony had prescribed to achieve this.

Earlier this week, reports indicated that the Sony and Zee merger collapsed due to disagreements over more than 20 compliance issues. Reuters disclosed that the conflict included Zee’s inability to divest certain Russian assets and its $1.4 billion cricket rights deal with Disney.

Emails exchanged between Sony’s legal and M&A executives in India and Los Angeles and Zee’s top executives unveiled a backstage conflict that prompted Sony to annul the $10 billion merger.

A dispute arose between Sony and Zee regarding four Russian companies involved in the production and distribution of content.

The merger agreement forbade dealings with firms based in nations under US sanctions. According to Zee, the delay in the divestment process was caused by modifications in Russian rules.

“Several events, circumstances, state of facts, conditions have occurred, which have, or are reasonably likely to have a ‘material adverse effect’ on the business, operations,” Drew Shearer, a top Los Angeles-based Sony executive, wrote in an email.

A week after that, on December 27, Zee’s India counsel, Shyamala Venkatachalam, accused Sony of trying to construct a narrative without a factual basis. Zee expressed disappointment, labelling Sony’s actions as a sudden volte-face carried out in bad faith.

 

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